Energy giant appears to put Costa Rica on notice over oil

By the A.M. Costa Rica staff

A U.S. energy firm created a stir in Costa Rica when it issued a press release Monday that said its subsidiary was about to get a concession contract from the Costa Rican government.

This is the controversial plan by the subsidiary, Mallon Oil Co., to drill exploratory wells at three points in the northern zone.

The parent company, Black Hills Exploration & Production, Inc., noted that it purchased Mallon in 2003. Its subsidiary here is working with the Costa Rican government to obtain execution of an oil and gas lease concession contract to allow for exploration of approximately 2.3 million acres of land in northern Costa Rica, it said.

Environmental activists here are strongly opposed to any exploration. So are some political parties.
President Laura Chinchilla said she favors natural gas exploration but not petroleum.

Recent news reports from Costa Rica have indicated that the concession contract may be executed, necessitating a comment from the company, said Black Hills.

“Mallon Oil Company began working to obtain this concession in 1999, and we have continued that
effort since acquiring Mallon in 2003,” said David R. Emery, chairman, president and chief executive
officer of Black Hills Corp., as quoted in the press release “For years, it did not appear the concession contract would be executed, but now there is a reasonable possibility that the concession contract may be executed by the Costa Rican government this year. Upon successful execution of the concession contract, Black Hills will develop
plans regarding the property and disclose more information as appropriate.”
In 1998, the Costa Rican government invited all oil and gas companies to submit competitive bids for
oil and gas lease concessions within the country pursuant to the hydrocarbon laws of Costa Rica, Black Hills noted. In 1999, Mallon Oil Co., through its wholly owned subsidiary Mallon Oil, Sucursal, submitted bids for six
separate tracts collectively covering approximately 2.3 million acres in the northern portion of Costa Rica, it added.

After a thorough analysis of the bid proposals, all six bids from Mallon Oil, Sucursal, were accepted and
awarded in 2000 and are subject to execution of the concession contract, the company continued. Throughout the entire process, Mallon Oil, Sucursal, has met all legal requirements necessary to preserve its rights under the concession while the government of Costa Rica has followed its laws and procedures applicable to execution of the final concession contract, it said.

The company made no mention of the fact that Mallon was tied up in court here for 11 years by legal filings by environmental activists.

Black Hills serves 762,000 natural gas and electric utility customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming, the company said.

Black Hill is a New York Stock Exchange-listed company. As such it has certain legal obligations to disclose material facts to the public. However some here took the press release as the company putting Costa Rica on notice that it no longer was dealing with a small Denver energy firm but a major player in the energy field.

Under the U.S. free trade treaty with Costa Rica, Black Hills can request international arbitration and compensation if the concession is not granted.

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